Another Aspect of the Dem Disaster: Drug Price Controls

We have not yet taken the measure of the disaster that is the Democrats’ “Inflation Reduction Act,” perhaps the most absurdly named statute ever. One element of the law that has not gotten enough attention is its imposition of price controls on pharmaceuticals. Price controls are always, and everywhere, a terrible idea. When you apply price controls to a vital product like drugs, the results could be catastrophic.

At Real Clear Policy, my colleague Peter Nelson, who worked at the Centers for Medicare & Medicaid Services in the Trump administration, where he was in charge of price transparency initiatives, explains:

I coauthored a new report with my colleague John Phelan at Center of the American Experiment which highlights how drug price controls would weaken the U.S. drug industry’s global leadership position and give China the opportunity to control greater market share to advance their national interests.

The package of price controls in the budget reconciliation bill would require Medicare to set prices for certain high-cost drugs and require drug manufacturers to pay rebates to the federal government when price increases exceed inflation. It uses the term “negotiation,” but it operates as a strict price control. That’s because excessive penalties on drug manufacturers for not negotiating make it a negotiation drug companies can’t refuse. Meanwhile, the inflation rebates impose price controls on nearly all drugs covered by Medicare Part D, as well as brand drugs and biologics covered by Medicare Part B.

Europe’s drug manufacturing industry used to be the global leader, but this leadership position eroded over the past three decades and the U.S. now stands on top. Over the most recent five-year period from 2016 to 2020, the U.S. accounted for 138 of the new chemical and biological drug entities, followed by Europe at 64. Twenty years ago, Europe was on top.

The budget reconciliation bill’s strict price controls create a serious risk that the U.S. drug industry might follow in Europe’s footsteps.

To the benefit of–who else?–China. Much more at the link, and especially in the linked report.

There is reason to think that Joe Biden is beholden to the Chinese Communist Party because of corrupt business transactions he has profited from over the years. But what about the 50 Democratic senators? Do they seriously want to devastate America’s pharmaceutical industry, and transfer international leadership in drug innovation to the Communist Chinese?

I certainly hope not. The most charitable interpretation is that most Democratic senators have no idea what is in the package that they have voted for.

Notice: All comments are subject to moderation. Our comments are intended to be a forum for civil discourse bearing on the subject under discussion. Commenters who stray beyond the bounds of civility or employ what we deem gratuitous vulgarity in a comment — including, but not limited to, “s***,” “f***,” “a*******,” or one of their many variants — will be banned without further notice in the sole discretion of the site moderator.

Responses